What is a Buyer-Broker Representation Agreement?

A buyer-broker agreement is a legally binding document that outlines the terms of the professional relationship between you and your buyer’s agent. The agreement specifies essential details such as:

*The agent’s compensation

*The duration of the agreement

*Any exclusivity clauses

*The agent’s role and responsibilities

This contract serves to protect both the buyer and the agent by clearly defining expectations from the outset. In the past, these agreements were optional, but starting in 2025, they will be required before a Realtor can show you any properties.

It’s also important to note that not all buyers’ agents are Realtors. A Realtor is a licensed agent who is a member of the National Association of Realtors (NAR). The terms of a buyer-broker agreement may vary by region or agent, so it’s vital to understand whether you are working with a licensed real estate agent, a Realtor, or a for-sale-by-owner (FSBO) seller.

Do I Have to Sign a Broker-Buyer Agreement?

While buyer-broker agreements have existed for some time, the new law makes them mandatory, as of January 1, 2025.  According to Lisa Hinkson, a top-selling agent in North San Diego, “The change now requires agents to formalize the relationship with a written agreement that details the terms, including fees, before showing any properties or engaging in substantial work for a client.”

If you decline to sign the agreement, your agent will not be able to show you properties or assist in any transactions. The written agreement ensures both parties are on the same page and helps prevent any misunderstandings.

Why Are Buyer-Broker Agreements Changing?

The change stems from the $418 million settlement reached between the U.S. Department of Justice and the National Association of Realtors (NAR) earlier in 2024. The settlement, a response to class-action lawsuits regarding home-seller commissions, aims to “decouple” the compensation for seller’s and buyer’s agents.

Do I Need to Sign an Agreement to View an Open House?

Typically, you will not need a signed buyer-broker agreement to attend an open house hosted by the seller’s agent. However, the industry is evolving, and policies regarding open houses may change depending on the region or specific brokerage. In California, new forms require open house visitors to fill out a form asking if they are currently working with an agent or not.

If you’re interested in working with an agent for a more personalized experience or to tour homes privately, you will need to sign an agreement. This will give you access to an agent’s expertise and ensure they can represent you during property negotiations.

What’s Included in a Buyer-Broker Agreement?

Although there is no one-size-fits-all contract for buyer-broker agreements, they typically outline:

Exclusive vs. Non-Exclusive Agreement: An exclusive agreement means you are committed to working with a specific agent, whereas a non-exclusive agreement allows you to work with multiple agents.

Compensation Details: The agreement should clearly state how the agent will be compensated for their services and the total amount must be included with no option to state “whatever the seller is paying.” The commission now must be clearly defined or the contract is voidable.

Contract Length: The agreement may specify how long you will work with that agent, ranging from a single property to several months.

Cancellation Terms: It will outline how either party can terminate the agreement if needed.

The specific terms of these contracts will vary by market, and some agents may offer shorter-term agreements for greater flexibility.

Are All Buyer-Broker Agreements the Same?

Not all agreements are identical. Common variations include:

One-Property Agreement: For those who wish to view a single property with an agent.

One-Day Showing Agreement: Covers multiple properties viewed in one day.

Exclusive Agreement: Most common, binding you to work with one agent for the duration of the agreement, often for several months.

Ultimately, the terms of the agreement must be transparent and easily understood. It’s always recommended to consult with a real estate attorney before signing any contract to ensure you fully understand the terms.

What to Look Out for in Buyer-Broker Agreements

Before signing any agreement, it’s important to do your due diligence on the agent. Ensure they have a solid track record, and make sure the terms of the agreement align with your needs. Keep an eye out for:

Agent Fees: Be clear about the agent’s compensation structure and any additional fees.

Exclusivity: If the agreement requires you to work exclusively with that agent, make sure it aligns with your goals.

Duration: Understand how long you’ll be committed to working with the agent.

Lisa Hinkson, a leading real estate agent in California, explains, “Buyers should ensure they’re comfortable with the terms and the agent’s fee structure. If you’re unsure about signing a long-term agreement, consider starting with a shorter-term contract.”

What’s Next for Buyer-Broker Agreements?

While the landscape of real estate is continually evolving, Lisa is here to help guide you through the process. I can connect you with experienced lenders, escrow and title agents, termite and other real estate- related vendors who are well-versed in the latest regulations and can help you navigate through all of new national and state requirements.

If you’re looking to buy or sell a home, Lisa Hinkson is a trusted agent in your area to make the process as smooth as possible.

This update reflects the most recent changes in the real estate industry, with a focus on providing clarity and transparency to both buyers and agents. If you’re preparing to purchase a home in California or elsewhere, understanding these new regulations will help ensure a smooth and informed experience.